In a few years, local communities in America will be totally different places. There will be very few iconic retail chain stores, or sales people behind counters and on the shopping floor. Automated Amazon Go stores and remote warehouses will replace most local retail stores, killing millions of sales jobs, and bring further losses to investors in these icons.
And making this transformation happen sooner rather than later? Minimum wage hikes.
For years, American retail icons like Macy’s, JCP, and Wal-Mart colored the lives of local communities, providing sales jobs for millions of people. Then came on-line retailer Amazon to crush these icons, as evidenced by their sluggish sales, falling margins, and equity price performance.
In the most recent quarter, for instance, Macy’s sales dropped by 4.20 percent, while Amazon sales increased by a whopping 29 percent. In the last ten years, Macy’s stock is down 34 percent, while Amazon’s stock is up close to 2000%--see table.
| Company | Operating Margins | Sales | Employees | QtrlySales Growth | 10-year Stock performance |
| Amazon | 3.16% | $127.99B | 222,400 | 29% | 1951.69% |
| Macy’s | 7.46 | $26.13B | 157,900 | -4.20 | -34.16 |
| JCP | 0.98 | $12.58B | 105,000 | -1.40 | -91.61 |
| Wal-Mart | 4.79 | $484.10B | 1,400,000 | 0.70 | 40.61 |
Source: Finance.yahoo.com 1/18/17
Now things are expected to get worse, as Amazon is getting ready to roll out its own Amazon Go stores—a new chain of convenience stores to be rolled out in 2017 without floor employees to assist customers, no store greeters, and no cashiers to collect payments. They will all be replaced by technology – which will monitor customers entering the store, record what they buy, and ensure that they are charged the appropriate amount (that's according to a video release, though it was denied by an Amazon spokesperson).
While the primary driver behind Amazon’s new store concept is to speed the shopping experience by cutting down the long lines usually observed in convenience stores, cutting labor costs is also a factor. Amazon usually operates at razor thin margins, and cutting an employee or two can make the difference between making and losing money.
Sadly this trend of doing away with salespeople will be supported and reinforced by minimum wage hikes, which will hit traditional retailers, which employ too many employees compared to Amazon, hard -see table.
JCP’s labor force, for instance, is half the size of Amazon’s, though its sales are one-tenth of that of Amazon. How can a company like that cope with wage hikes and compete effectively against Amazon?
To be fair, automation may destroy traditional sales jobs but not work. Amazon's stores will still create jobs in new areas. "Getting rid of checkout lines is great for customers and allows our store team to spend more time doing the things we think make the customer experience great. Amazon Go associates work in both the kitchen and the store, prepping ingredients, making breakfast, lunch, and dinner items, greeting customers at the door, stocking shelves, offering product samples, and helping customers. When the store is open to the public, customers will see a great group of store associates on the floor and in the kitchen."
That's according to an Amazon spokesperson.
